DCIT, CHENNAI V. M/s. Tarachanthini Financial Services (P) Ltd., CHENNAI

ITA 549/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5260 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-04-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 23-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TAPAS KUMAR DUTTA
• Assessee Lawyers: G VARDINI; PUSHYA SITARAMAN
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 473/MDS/2010 ASSESSMENT YEAR : 2000-01 M/S TARACHANTHINI SERVICES PVT. LTD NO.25, TAURUS NO.1, FIRST MAIN ROAD UNITED INDIA COLONY KODAMBAKKAM CHENNAI 600 024 VS THE ACIT COMPANY CIRCLE III(1) CHENNAI [PAN AAACP9272H] (APPELLANT) (RESPONDENT) I.T.A NO. 549/MDS/2010 ASSESSMENT YEAR : 2000-01 THE ACIT COMPANY CIRCLE III(1) CHENNAI VS M/S TARACHANTHINI SERVICES PVT. LTD CHENNAI 600 024 (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. PUSHYA SITARAMAN & MS. G.VARDINI DEPARTMENT BY : SHRI TAPAS KUMAR DUTTA O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE RESPECTIVELY, FOR ASSESSMENT YEAR 2000-01, ARE DIRECTED AGAINST T HE ORDER OF THE LD. CIT(A)-III, CHENNAI, DATED 29.1.2010. ITA 473 & 549/10 :- 2 -: 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A CLOSELY HELD COMPANY AND WAS ENGAGED IN THE BUSINES S OF DEALING IN SHARES. THE NAME OF THE COMPANY HAD BEEN STRUCK OF F FROM THE RECORDS OF REGISTRAR OF COMPANIES VIDE ORDER NO.277 4/SES/205 DATED 10.5.2007 OF REGISTRAR OF COMPANIES. ON 27.11.200 0 THE ASSESSEE FILED ITS RETURN OF INCOME ADMITTING LOSS OF ` 78,42,605/-. THE ASSESSMENT WAS DONE U/S 147 R.W.S 143(3) OF THE AC T ON 31.12.2007. IN THIS ASSESSMENT ORDER, DISALLOWANCE OF EXPENDITU RE U/S 14A IN RESPECT OF EXEMPT INCOME, AN EXPENDITURE OF ` 72,93,929/- AS BROKERAGE AND GENUINENESS OF LOANS TO THE TUNE OF ` 22.05 CRORES WERE CONSIDERED. THE RE-ASSESSMENT WAS COMPLETED AT A T OTAL INCOME OF ` 27,33,38,540/- BY MAKING THE FOLLOWING ADDITIONS: (I) INCREASE IN SHARE CAPITAL 99,99,000 (II) UNSECURED LOAN 3,60,74,309 (III) INTEREST 42,94,140 (IV) SERVICE CHARGES 32,99,560 (V) INVESTMENTS 21,75,00,493 (VI) ELECTRONIC TRANSFER CHARGES 76,93,929 (VII) OFFICE MAINTENANCE 22,79,697 (VIII) DISALLOWANCE U/S 14A 40,013 TOTAL ADDITIONS/DISALLOWANCE 28,11,81,141 3. THIS ACTION OF THE ASSESSING OFFICER WAS CHALLENGED BEFORE THE LD. CIT(A), WHO HAS GIVEN PART RELIEF TO THE ASSESS EE. NOW THE ASSESSEE IS FURTHER AGGRIEVED. AFTER TAKING REGULA R GROUNDS OF APPEAL, ITA 473 & 549/10 :- 3 -: AN ADDITIONAL GROUND HAS BEEN RAISED BY THE ASSESSE E WHICH READS AS UNDER: THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE ASSESSM ENT ITSELF WAS BAD IN LAW AND A NULLITY SINCE THE NAME OF THE APPELLANT COMPANY WAS STRUCK OFF FROM THE REGISTER OF COMPANIES EVEN BEFORE THE ASSESSMENT ORDER WAS PASS ED; AS HAS BEEN HELD BY THE DELHI BENCH OF THIS HON'BLE TRIBUNAL IN THE CASE OF IMPSAT P. LTD VS ITO [2005] 276 ITR (AT) 136. 4. THE ADDITIONAL GROUND GOES TO THE VERY ROOT OF THE MATTER, THEREFORE, WE CHOSE TO HEAR THE PARTIES ON THIS AD DITIONAL GROUND. THE LD.AR VEHEMENTLY ARGUED THAT SINCE THE NAME OF THE APPELLANT COMPANY WAS STRUCK OFF FROM THE REGISTER OF REGISTR AR OF COMPANIES EVEN BEFORE THE ASSESSMENT ORDER WAS FRAMED, THE AS SESSMENT MADE ON A NON-EXISTING ENTITY TANTAMOUNTS TO A NULLITY. IN THIS REGARD, REFERENCE WAS PLACED ON THE DECISION OF DELHI BENCH OF THE ITAT IN THE CASE OF IMPSAT P. LTD VS ITO, 276 ITR (AT) 136. T HE REVENUE HAS DISPUTED THIS CONTENTION OF THE LD.AR. ORIGINALLY, IN THE ASSESSMENT ORDER, THE NAME OF THE ASSESSEE WAS MENTIONED AS TARACHANTHINI FINANCIAL SERVICES PVT. LTD., CHENNAI, BUT IT WAS SUBSEQUENTLY RECTIFIED AS M/S TARACHANTHINI SERVICES PVT. LTD INSTEAD OF TARACHANTHINI FINANCIAL SERVICES PVT. LTD. THROUGH CORRIGENDUM, VIDE NO.31121- TAAACP 9272H/CO.CIR-III(1)/00-01 DATED 15.11.2010, ISSUED BY SHRI K.SIVABHAGYA RAO, IRS, ACIT, COMPANY CIRCLE III(2), CHENNAI -34. A COPY OF THE GAZETTE NOTIFICATION DATED 25.5.2007 H AS BEEN FILED BEFORE ITA 473 & 549/10 :- 4 -: US IN WHICH, UNDER ITEM NO.182 THE NAME OF APPELLA NT HAS BEEN MENTIONED IN THE LIST OF THE COMPANIES WHOSE NAMES HAVE BEEN STRUCK OFF FROM THE REGISTER OF REGISTRAR OF COMPANIES, AN D THE COMPANY STANDS DISSOLVED THEREAFTER. THESE FACTS, IF FOUN D TO BE CORRECT, THE ASSESSMENT ORDER HAS BEEN FRAMED AGAINST A NON-EXIS TENT ENTITY. THE RATIO OF THE DECISION OF THE ITAT DELHI BENCH REND ERED IN THE CASE OF IMPSAT P. LTD VS ITO(SUPRA), WILL SQUARELY APPLY TO THIS CASE. IN THIS CASE IT HAS BEEN HELD THUS: HELD, ALLOWING THE APPEAL, (I) THAT SINCE THE COMPANY ITSELF WAS DISSOLVED AND BECAME EXTINCT WITH EFFECT FROM SEPTEMBER 18/ 2001, IT COULD NOT BE CONSIDERED TO BE A CASE OF DISCONTINUANCE' OF THE BUSINESS. ONCE IT CEASED TO EXIST, TH ERE WAS NO QUESTION OF ASSESSING IT FOR INCOME-TAX. THE CONDUCT O F THE ASSESSEE IN FILING THE RETURN OF INCOME AND PARTICIPA TING IN THE PROCEEDINGS FOR ASSESSMENT DID NOT CONFER JURISDICTION UPON THE ASSESSING OFFICER TO ASSESS IT, WHICH MUST REALLY DEPEND UPON THE EFFECT OF THE PROVISIONS OF THE INCOME- TAX ACT. IN THE ABSENCE OF ANY PROVISION IN THE ACT TO ASSESS THE ASSESSEE THAT HAD BEEN DISSOLVED AND THUS CEASED TO EXIST, NO ASSESSMENT ORDER COULD BE MADE AGAINST IT BY THE ASSESSING OFFICER. THUS, THE ASSESSMENT ORDER PASSED ON THE ASSESSEE- COMPANY WAS A NULLITY. ITA 473 & 549/10 :- 5 -: 5. BUT, THE FACTS RELATING TO THIS ISSUE ARE NOT CLEAR LY CULLED OUT AND THE ASSESSING OFFICER IS REQUIRED TO VERIFY THE SAM E. THEREFORE, BOTH THESE APPEALS ARE RESTORED TO THE FILE OF THE ASSES SING OFFICER. THE ASSESSING OFFICER SHALL INVESTIGATE AND STATE THE C LEAR FACTS. IN CASE HE FINDS THAT THE COMPANY WAS NOT IN EXISTENCE AT THE RELEVANT TIME, THE ASSESSMENT ORDER CANNOT STAND AND THE MATTER WILL E ND UP THEN AND THERE. OTHERWISE, HE CAN PROCEED FURTHER. HAVIN G DECIDED AS ABOVE, THERE IS NO NEED TO DECIDE THE OTHER ISSUES TAKEN O N MERIT. 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18.4 .2011 SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 18 TH APRIL, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR